Special court to fast-track prosecution cases: Sebi

Confident that reforms in IPO market will improve ease of doing business in the country, the Securities and  Exchange Board of India (Sebi) chief U K Sinha has said the regulator is determined to bring fraudsters to book and has attached assets worth Rs 2,000 crore to protect investors' interest.

Sinha also said that special courts will hear cases filed by the regulator which would help fast-track the prosecution and recovery proceedings against the defaulters and get the investors their money back expeditiously.

A decision to set up special courts was taken following amendments to the Sebi Act last year, which also provided greater powers to Sebi in delivering its mandate to protect the interest of the investors and regulate the capital markets.

"A special court has been set up in Mumbai. We have started filing cases there," the Sebi Chairman said.

Sinha said that the new powers have been very helpful to Sebi in delivering its mandate and for bringing to book the defaulters including those defrauding the gullible investors with illicit money-pooling schemes promising huge returns.

"The good thing has been that on collective investment schemes, there is a clarity that anything more than Rs 100 crore is a CIS. Earlier this was not clear.This is one major thing that has happened. Our power of recovery has also helped us. We have already attached more than Rs 2,000 crore worth of assets. Thirdly, a special court has been set up," Sinha said.

As per the available data, Sebi has initiated more than 2,100 attachment proceedings in over 700 cases so far under the new powers.

These proceedings include attachment of bank and demat accounts, attachment of movable and immovable properties, appointment of receivers for management of attached properties and arrest and detention of defaulters.

Sebi can now pass attachment orders and launch recovery proceedings against fraudsters and market manipulators, including those running illegal deposit schemes.

While Sebi was established more than 25 years ago, it has got direct recovery powers recently to act against those refusing to pay penalties and other dues.

Earlier, Sebi had to follow a time-consuming process of filing prosecution against defaulters and fraudsters, and the number of defaulters refusing to pay the dues had crossed 1,300 last year.

On ease of doing business, where India is ranked very poorly, and steps that Sebi is trying to make things better.  Sinha said the country already ranks much better globally when it comes the regulatory framework and steps required to protect minority investors.

Recently at the Eease of Doing Business index of the World Bank, India was ranked 7th last year on these parameters, while its overall rank was much lower at 140th.

Sinha said there was a wrong perception that greater regulatory compliance makes it difficult to do business in a country. On the contrary, a country is placed better in terms of ease of doing business if there are enough protections available for the minority investors.

On the other hand, Sinha said, Sebi has taken a number of steps to improve ease of doing business and develop the markets.

"On the developmental part, some of the important measures taken by Sebi are with regard to IPO processes," he said, while listing out steps like halving the time period of listing after IPO to six days, new norms for listing of start- ups and making the entire IPO process cheque-free.

Sinha said a series of initiatives has been taken to reduce the listing time from 12 days to six days, along with a number of investor friendly measures.

"One is that we have insisted upon that there will be a compulsory ASBA. The important thing here is that if you apply for an IPO and issue a cheque, your account gets debited.

"Once the account gets debited, and lets assume you have applied for Rs 1 lakh, but you eventually get allotted only Rs 40,000, then you are eligible for a refund of Rs 60,000. But that refund used to take lot of time.

"So, first you lose interest on that Rs 1 lakh from day one, and it was not certain by when you would get your Rs 60,000 refund," Sinha said.

He further said Sebi has a very detailed mechanism to ensure that your complaint as an IPO investor is addressed.

"We also have a mechanism to ensure that we keep 1 per cent of the money raised in an escrow account, so that in case of an investor grievance not being addressed, we will not release this money to the company," he added.